Breakouts Definition – What is Breakouts? | CFI VU


A  breakout is when the price of a financial instrument or asset trades below a level of support or above a level of resistance. Breakouts demonstrate the possibility but not a certainty for the price of the asset or instrument to start a new movement in the direction of the breakout. As an example, a breakout through a major support level to the downside could indicate that the price will start to trend lower. Breakouts that occur along with high traded volumes (relative to normal traded volumes) confirm greater conviction and a greater likelihood that prices will trend in the direction of the breakout.


Breakouts will occur when a price has been contained, often for long periods, above a major support level or below a major resistance level. This level will become a line in the sand for breakout traders to enter the market once the level is broken or for traders already holding positions, who didn’t want the price to breakout, will have stop losses triggered and avoid larger losses.


The large increase in trading activity at the breakout level will more than likely cause an increase in volume traded. The higher traded volume will help to confirm the breakout. However, if volume does not increase around the breakout, it may not be confirmed and could likely fail.


Key takeaways:

  • Breakouts are used by breakout traders to enter new trades at key support and resistance levels.
  • Price will normally retrace to a breakout level due to profit-taking by short-term traders.
  • Breakouts resulting in higher volume usually have more conviction.
CFI Financial Group is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
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We would like to remind that while we endeavour to provide best possible services, Credit Financier Invest Limited provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.

Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest Limited provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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